Financial Scarcity and Economic Decision-Making

Study 1 (lab experiment) involves the random assignment of participants to either a high or low initial endowment condition.

In Study 2 (field experiment), participants are exposed to either financial scarcity priming or no priming, achieved by emphasizing a high bride price. Under the priming condition, subjects respond to questions about bride price and express their concerns regarding their children's future financial needs before making economic decisions.

2023-11-20

2024-07-31

For both Study 1 and Study 2, the primary outcomes include: (1) how many correct answers for the "making money" task described in experimental design details; (2) how much the individual chooses to invest in the risky project compared to the risk free project in a long-term investment; (3) the subjects' subjective stated preference between "making more money" versus "spending less"; (4) subjects' risk preferences in the gain domain and the loss domain. For Study 2, the monetary value of time is also a primary outcome.

The primary hypotheses are as follows:
(1) Individuals experiencing financial scarcity are expected to underperform in the "make more money" task compared to their counterparts, as their attention is hypothesized to be more directed towards the "save money" task. We will employ non-parametric tests to compare the number of correct answers of those considered financially affluent and those facing financial constraints.
(2) People under financial scarcity are anticipated to exhibit greater myopia, leading to increased risk aversion in the long-term investment task. Non-parametric tests will be utilized to compare the investment amounts in the risky asset between individuals classified as financially rich and those deemed financially poor."

For both Study 1 and Study2, we also consider the time preference and cognitive ability as a seconderary outcomes. For Study 2, we will also consider some other outcomes, including subjects' cognitive ability, aspiration and hope, and their investment to offsprings.

We will test whether the link between financial scarcity, performance in the main task , and long-term investlment is mediated by variables such as time preferences, cognitive ability. We also will test whether financial scarcity is related to subjects' aspiration, hope and their investment to offsprings.

Study 1 (lab experiment): Student subjects are randomly assigned an endowment of either 1000 or 5000 Experimental Currency Units. Then they perform a series of economic tasks that allow us to measure notably risk and time preference, long-term investment with risk, and decision conflict between making money and saving money.
Study 2 (field experiment): We will run a lab-in the-field experiment in areas with high bride price, recruiting rural residents who have unmarried children. We will randomly prime the financial pressure from high bride price and the impact of this pressure on economic decisions in variouseconomic games. These include assessments of risk and time preferences, long-term investment with risk, and decision conflicts between making money and saving money.

Not available

In the lab experiment, randomization and assignment to a given condition will be made by the computer program. In the field experiment, subjects will be randomised into the priming or no priming condition by an experimenter's coin flip. The random draw will be made in advance for each subject before we start the inverview.

Individual

No

Study 1 (lab experiment): 180;
Study 2 (field experiment): 350.

Study 1 (lab experiment): 180; Study 2 (field experiment): 350.

Study 1 (lab experiment): 90 per each treatment (high versus low endowment)
Study 2 (field experiment): 50 control in low bride price area (also rich area), 50 parents of two boys in the no priming condition; 50 parents of two boys in the priming condition; 50 parents of two girls in the no priming condition; 50 parents of two girls in the priming condition; 50 parents of other conditions (not parents of two girls or two boys) in the no priming condition. 50 parents of other conditions (not parents of two girls or two boys) in the priming condition.

Based on a pilot of Study 1, the mean difference of correct answers in "making money" task is 3 beween the high versus low endowment, with average standard deviation of 4, which indicates an effect size of 0.75. The mean difference of investment in long-term investment is 12 beween the high versus low endowment, with average standard deviation of 27, which indicates an effect size of 0.43.